It is now well established that bone marrow contains a population of cells, marrow stromal fibroblasts (MSFs, also known as CFU-f), that have the potential to form bone/cartilage, adipose and hematopoiesis support tissue, depending on the microenvironment and systemic and local growth factors that they are exposed to. The ability of human marrow stromal cells, derived from bone aspirates from patients recruited under protocol 94-D-0188 to form new bone when implanted into immunosuppressed animals was investigated. It was determined that 1) in vitro expansion of the osteogenic cells in the population of human marrow cells requires the continuous presence of dexamethasone and ascorbate-2-phosphate and that 2) small particles of tricalcium phosphate - hydroxyapatite ceramic with attached human MSFs held together by a fibrin clot supports exuberant new bone formation upon implantation into immunosuppressed mice and 3) the new bone formed appears to be lamellar in character indicating a bypass of the woven bone stage usually observed in de novo bone formation. These results indicate efficacy of this system for bone augmentation and will serve as the basis for future protocols designed to perform these procedures in human patients.